Behind the ouster of George Washington's B-school dean

(Poets&Quants) — For Doug Guthrie, dean of George Washington University’s business school, August 22 was like most work days. It was to start off with a meeting.

On his calendar was an early morning session with University President Steven Knapp to discuss the business school’s budget. Guthrie wasn’t expecting it to be all that pleasant. After all, the university had asked him to cut the school’s budget by $7 million to $57 million this year and he had been resisting.

However, Guthrie would never see Knapp — and there would be no budget meeting that morning. Instead, the dean was called aside by Provost Steven Lerman and asked to follow him to his office. “As we walked back to his office, I realized something more serious was afoot,” recalls Guthrie.

Moments after sitting down, Lerman announced: “We’re firing you.”

“I was quite stunned,” says Guthrie, 44, who had been recruited from New York University’s Stern School to become dean in 2010. “I had thought a possible outcome [of the budget issues] would be they would say we can’t get this to work and we need you to help us with the transition. But the provost said, ‘it seems to us that we’ve reached a point where there is a lack of trust and a lack of ability for us to work together.’”

Guthrie asked about the university’s plans for China, an expansion area he had led for the university as its vice president for China, and about the business school’s upcoming re-accreditation plans. The replies were terse, leading Guthrie to believe his firing was given little forethought. Within 15 minutes, he was ushered out of the office, without his job as dean.

Guthrie’s abrupt ouster shocked faculty and students alike, but what truly surprised them was the public nature of the dismissal. At 11:30 a.m. on the day of his firing, Provost Lerman issued a statement to the GW community in which he noted that “fundamental differences about financial and operational performance were significant enough to warrant a change in leadership.” The following day, in an interview with the student newspaper, Lerman made clear that Guthrie was fired over a spending spree that resulted in the dean going over his school’s budget by $13 million in the fiscal year ended June 30.

But there may be more to the dean’s dismissal than that. For one thing, the overspending was hardly a surprise to the administration, which had approved the dean’s plans for growth along with the investments required to increase the school’s revenues and stature. In fact, Guthrie had been hired with a mandate to turn George Washington’s business school into an elite player.

While it’s true that spending was higher than expected, the administration had been prepared for a significant overruns — every contract the business school had was approved by the university administration — but not $13 million. On April 22, at one of the dean’s regular check-in meetings with the administration, Guthrie told the university that he expected to overspend his budgeted expenses by about $8 million. But he could cover the full amount of overspending with reserve funds and higher-than-expected revenues. The overage was largely attributed to the costs to launch and market several new online degree programs and executive education programs.

By the time the fiscal year closed, the overrun ballooned to $13 million. Even so, the business school was able to cover most of the additional expenses with its own reserves, except for about $2.5 million out of a total budget of $64 million.

When Guthrie, a professor at NYU Stern, came to GWU in 2010, the university wanted to put its business school on the map. The management professor-turned-dean aggressively raised standards for faculty and put in place more competitive packages to retain the school’s best professors and recruit better talent. He also increased spending on marketing to give the school greater visibility.

An expert on China who speaks fluent Mandarin, Guthrie launched two new degree programs in China, a master’s of finance, a master’s of accounting, and he was working on a new program, a master’s in business analytics. He also revamped the GW’s undergraduate business curriculum and started a new B.S. in finance, requiring a double major with the liberal arts. And Guthrie plowed ahead in online education, signing a deal with Pearson (PSO) to launch an online MBA program, revamp the school’s existing online programs in project management and information systems technology, and a healthcare MBA.

The new programs helped Guthrie exceed his annual revenue targets. In the year ended June 30, the school’s revenue came in at $106 million against a target of $102 million. When Guthrie started three years ago, the school’s annual revenue was $83 million. The new dean had increased revenue by 27% at a time when many business schools were retrenching.

This year, however, the university expected to keep $51 million of the school’s projected $102 million in revenue. Guthrie could retain the rest — some $51 million — to run the school. Instead, Guthrie spent $64 million and had only $42 million to hand over.

Guthrie argues that the additional investments were crucial to the school’s transformation. “There is one statistic that is a perfect correlation with top 20 rankings,” says Guthrie. “It is expenditure per faculty member. The Top 20 schools are spending on average about $450,000 per faculty member, on everything from research to career services. We were at $220,000. The agreement was that they wouldn’t completely change our budgeted expenses, but they would move them up gradually and I would pay for them from reserve funds.”

In the first year of his deanship, the university invested $7.5 million. In the second, Guthrie tapped into reserves for nearly $6 million more. But the following year, the administration wanted to pull back on the expansion plans. “We had an agreement and they wanted to cut way back,” explains Guthrie. “I said, ‘We already [are] not where we need to be. If we have to give the university more money, I don’t think I’m the right person for this. I didn’t come here to be the steward of a cash cow. I came here to build programs and make investments.’”

That conversation happened this past summer. “I was feeling like I could maintain quality and run a school with a $60 million budget,” recalls Guthrie. “When I came in, the budget was $40 million and that was low for an elite school. They agreed to an ambitious plan and investment. Each year we knew we were going to be overspending but we would do that through a combination of reserve funds and university investment.”

He says the administration wanted his 2014 fiscal budget to be $57 million, some $7 million less than the school spent last year, and its net contribution to the university to rise substantially. Guthrie figures he would have had to cut research funds for faculty, summer salaries for junior faculty, and other expenses. “I didn’t think this was the right way to go,” he says.

The business school, moreover, was in the middle of an accreditation review that required additional spending on faculty. A written report to the accreditation review committee is due in early September, while a site visit to the school is expected in December.

Guthrie made his case in a memo that he shared with the deans of several of other schools at the university — a move that, in retrospect, hurt his standing with the administration. “I knew that the stand I was taking made it a pretty good chance they would say this isn’t working and let’s see it through accreditation. I decided I would be fine with it because I disagreed with the suggested budget cuts.”

GW takes issue with Guthrie’s take. “The university strongly disagrees with Doug Guthrie’s characterization of the events that led to his departure,” says Candace Smith, a university spokesperson. Smith says that the university did not back away from an agreement to invest in its business school. “On the contrary, in a meeting earlier this summer, the provost and the treasurer invited Dean Guthrie to submit a proposal for an additional university investment in the School of Business. That proposal was never received.”

Guthrie suspects there was a personality clash with President Knapp, a mercurial leader who prefers that administrators toe the line. “They think I am a little bit uncontrollable,” says Guthrie. “And I understand how that makes them uncomfortable. We tried a lot of things here, and maybe it was too much too quickly. I do have a lot of passion for this school, though, and that has made me a successful fundraiser. In the end, I have enjoyed my time here, and I wish the school and the students the best.”

For now, the former dean will remain at GW as a tenured professor. But he didn’t come to George Washington merely to teach.